The national Mortgage Bankers Association is seeking new rules governing mortgage brokers, but most of the changes the group seeks are in place already in the Bay State.
The 2,400-member, national trade group would like to see all brokers required to meet minimum net-worth and bonding requirements, be treated legally as borrowers’ agents, and be registered and licensed “in accordance with rigorous standards.”
The role of mortgage brokers “has increased in the last 10 years,” said Steve O’Connor, senior vice president for government affairs at MBA, which is lobbying Congress for the changes it says are necessary to reflect the increased responsibilities.
In Massachusetts, most of the proposed changes already have been made law, and the one that is not is, for all intents and purposes, already in effect, said David F. Hadlock, a Natick attorney who is also general counsel to the Massachusetts Mortgage Association, a broker trade group.
MBA would like to see the $63,000 minimum net-worth requirement that the Federal Housing Administration currently imposes on brokers that originate FHA-insured loans as the national standard, and thinks broker businesses should bonded at a minimum level of $75,000 or 10 percent of their business, whichever is greater.
Most states currently require a $25,000 net worth, O’Connor said. Massachusetts last year imposed a minimum net-worth requirement of $25,000, and a minimum bond re-quirement of at least $75,000, on brokers.
The laws went into effect for new broker businesses last September. Brokers in business prior to last fall won’t have to comply with the state mandate until January.
When the bond law passed, there was concern that insurance companies would think that the requirements were too steep, Hadlock said. But he said new brokers applying for bonds haven’t run into trouble.
MBA also is proposing that all brokers who claim to be or act as a borrower’s agent or advisor be considered legal fiduciaries.
A fiduciary agent is someone who looks after assets on another’s behalf and is expected to act in the best interests of that person.
State law doesn’t define brokers as fiduciaries, but Hadlock said things seem to be moving in that direction in practice and in court.
“In my view, [Massachusetts’] consumer protection law and the manner in which all existing laws are being interpreted is moving closer and closer to a fiduciary agent relation-ship,” he said.
MBA also would like to see all loan originators, including brokers and bankers, registered in a national database.
Massachusetts already requires this. In January, banking regulators here and in six other states, working through the Conference of State Bank Supervisors, launched the Na-tionwide Mortgage Licensing System database.
Originators at Massachusetts-regulated institutions must register by June 30. At least 37 other states have signed on to participate by the end of 2009, with New England ex-pected to be the first U.S. region in which every state is a participant.
MBA, which offered its proposed changes in recent testimony in Congress, presented them in a policy paper released to the public on Tuesday.
